Even Though Incomes Are Up, Americans Aren't Ready To Spend More

Although there are signs of hope for the economy as American incomes were up by the most they have been in nine months, the fact that we’re also keeping our spending exactly the same isn’t so great.

The Associated Press says incomes were up by 0.5% according to the Commerce Department, the biggest increase we’ve had since March. But consumer spending stayed flat, after paltry gains of 0.1% in the last two months.

For the economy to really get a boost in 2012, incomes must grow faster, because if they don’t, consumers will continue to cut back on spending. The more consumers spend, the more the economy grows and hopefully, the more people get hired for jobs. And what do people with jobs do? Spend money, and boost the economy! Consumer spending is about 70% of our overall economic activity.

Last year, the economy grew 1.7%, only about half the growth from 2010, although consumer spending did grow by 2.2.%, compared to 2% in 2010. Some of that spending, however, came from consumers using money from their savings.

Despite all the seeming gloom of these numbers, the Federal Reserve says 2012 will see an economic growth of about 2.5% for the year. This is in the face of cuts in federal spending, wary consumers and the cloud of the European debt crisis.